Tuesday, August 30, 2016

Bank of Cyprus reports six month 2016 results

Bank of Cyprus:

“The positive momentum continued in the second quarter of 2016. We reduced problem loans for a fifth consecutive quarter. We completed €2,8 bn of restructurings in the first half of 2016 and reduced problem loans by €2 bn or 18%. We expect to drive further reductions during the coming quarters. 

The Bank was responsible for two thirds of the reduction of NPEs in Cyprus since January 2015.

We were pleased to see our deposits grow by €619 mn in the second quarter, a good indication of increasing customer confidence in the Bank. ELA currently stands at €1,5 bn and was reduced by €2,3 bn year to date. Our target remains the full repayment of ELA as soon as possible.

We recorded good underlying operating profitability at €135 mn in the second quarter and we have directed this to support faster derisking of our balance sheet, through increased provisions. Second half of 2016 profits expected to be similarly directed.

The profit after tax for the second quarter was €6 mn and for the six months ended 30 June was €56 mn.

The Group’s capital ratio (CET1) stands at 14,4% at 30 June 2016. We recognise our role in ensuring a sustainable recovery. Since January 2015 we have granted over €1 bn of new loans and we are actively seeking to provide more credit to viable households and consumers.”

Things have obviously turned the corner at the Bank of Cyprus. With the upcoming listing on the London Stock Exchange I expect a re-rating of the stock. The price of the stock is off about 30% since I bought it. This stock is also suffering from a general down draft in European Banks.

Addressing the asset quality remains the Group’s main priority. The main priority of the Bank’s Restructuring and Recoveries Division (RRD) is the delivery of asset quality improvement. The new foreclosure legislation and insolvency framework, together with the intensive restructuring and workout activity implemented by RRD, the effective interaction with borrowers and the improving fundamentals of the Cypriot economy, are playing a significant role in reducing the level of problem loans.

This is exactly what I said would happen and this continued improvement will lead to a positive re-rating in my view. 

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